In this article, we look at the development and current state of the (re)insurance market in Singapore.
Singapore has firmly established itself as the reinsurance hub in the Asia-Pacific region. At the end of last year, two more reinsurers entered the market, bringing the number of reinsurers operating in Singapore to 26.
Gross premiums of reinsurance Offshore Insurance Fund ("OIF") business have grown from under S$1.5 billion (US$1.07 billion) in 2000 to around S$2.5 billion (US$1.8 billion). Singapore (Domestic) Insurance Fund business premiums have remained fairly static at around S$250-S$280 million during this period. Over half of the gross premium is generated from property risks, but there has been growth in recent years in hull and liability business, particularly since 2008 when gross premiums jumped by over 50 per cent from 2007 levels to around S$220 million.
Most OIF reinsurance business entering the Singapore reinsurance market comes from China. Gross reinsurance premiums for China business have grown from S$40 million in 2004 to over S$420 million in 2008. Gross premiums from India, Pakistan and Sri Lanka have doubled in the same timeframe, from S$96 million to over S$190 million. The amount of gross premium from established insurance markets such as Korea, Japan and Indonesia has remained relatively stable since 2005, staying at around S$200-S$280.
Lloyd's
Not surprisingly, Lloyd's has been at the forefront of the development of the reinsurance market in Singapore. Lloyd's Asia was set up in 1999 and, over the past few years, has grown exponentially. There were only three syndicates in 2005; now there are 15, with Atrium Insurance Agency (Asia) and Argenta Underwriting Asia being the latest additions. Hardy has recently announced that it too plans to set up in Singapore. Not only does this mean that Lloyd's is providing more capacity from Singapore to the Asia market, it is also offering cover for specialist risks which was previously unavailable.
Market Conditions
The recent flood of reinsurers into the market has increased capacity and caused concern regarding rates. That said, the increased capacity in Singapore means there is no longer a need to go to the London Market for lead terms on complex or large risks. Business from Japan, Korea, Australia and China is now being placed in Singapore.
The Future
Asia's share of the total market for insurance premiums is only 22 per cent, compared to 34 per cent and 41 per cent for the Americas and Europe respectively. As insurance penetration levels increase across Asia, there will be a greater demand for reinsurance products from Singapore. As the Asian markets become more sophisticated, the breadth and depth of products available should also increase.
The area in which growth is expected to be most prevalent in the next few years is catastrophe risks. Swiss Re recently produced a report showing that of the 20 worst catastrophes in terms of victims, 16 occurred in Asia and, of those, only three had insurance coverage. Recent incidents like the 2008 Sichuan earthquake also help to illustrate the point. The overall damage was around US$85 billion, but only US$759 million is estimated to have been (re)insured.
Recently, there has been a move towards writing specialist risks such as aviation, energy, political, terrorism and trade credit risks. As Islamic finance grows, Singapore will also be well placed to offer retakaful capacity. The year of the tiger and the future thereafter looks promising for disciplined reinsurers operating in the Lion City.
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